How Low Can the S&P 500 Go?

NEW YORK (TheStreet) -- For short-term traders, last week was rough. It was difficult to make money on either side, long or short. With such a volatile and choppy environment, set-ups are more likely to fail and trying to anticipate the next move is a guessing game.

This week could be no different or worse. We have geopolitical strife with Ukraine. We have the Federal Reserve's Federal Open Market Committee and the ongoing asset-purchase tapering, plus options expiration.

Although I do not believe we have seen the so called "top," and that the bull market has more room to run, I am seeing more to be concerned about in the short term.

First, for the first time in months, I am seeing better short set-ups than long ones. Second, we are not yet considered oversold based on a popular metric measuring stocks below their 20-day moving averages.

Third, the recent breakout in the S&P 500 during the first week of March that took prices over 1880 represented a new 20-day. This high was not confirmed with 20-day highs in stocks, which is considered to be a divergence.

Finally, during last week's drop there was a lot of technical damage done to many high-flying momentum stocks last that deserves our attention.

Not yet considered oversold




New SPX 20-day highs were never confirmed with new 20-day highs in stocks:



Levels to watch:

We are very close to hitting the 50-day moving average  (at 88.30) on the Nasdaq, as seen by the PowerShares QQQ Trust (QQQ), and I would be surprised if we didn't at least visit it. We are a bit further away on the S&P 500 and iShares Russell 2000 Index (IWM), but they are looking more and more likely to be paying a visit in the near term. Read the notes on all three charts.

If you liked this article you might like

Week Wasn't Bad but That's Not Necessarily Good

Like Your Market With a Little Froth?

Will the Plunge in Bitcoin Crush AMD and Nvidia?

Market Presents Traders With 2 Big Challenges

There Still Is a Bid Under the Market